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Approaching Storm! Derivative data shows high volatility in Ethereum, signaling potential risk of pullback.

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Approaching Storm! Derivative data shows high volatility in Ethereum, signaling potential risk of pullback.

Although Ethereum had a lackluster performance for most of 2019, it has surged by 84% since the beginning of this year in less than 6 weeks. Apart from consistently outperforming Bitcoin in price and on-chain data, it has also surpassed $200 for the first time in nearly 4 months.

Table of Contents

  • Ethereum's volatility relative to Bitcoin continues to rise, with expected pullback risks
  • Ethereum to Bitcoin exchange rate continues to appreciate

Derivatives data analysis firm Skew recently pointed out that Ethereum's volatility has been steadily increasing compared to Bitcoin over the past 4 months, and is expected to continue to rise.

Source: CoinMetrics

As of February 10th, Ethereum's implied volatility relative to Bitcoin is currently at a 6-month high. Bitcoin has been fluctuating around the $10,000 mark in recent days, which is often seen as a psychological barrier for investors and a sign that a bull market may be approaching.

However, higher volatility can help Ethereum rise to higher levels but may also indicate more significant downturns.

Shortly after breaking the $10,100 mark, Bitcoin has already experienced a correction, dropping nearly 300 points in 3 minutes by 14:00 on the 10th, settling at $9,789. It is speculated that this correction was to fill the "gap" left by the Chicago Mercantile Exchange.

Although the correlation between Ethereum and Bitcoin continues to decline, the increased volatility relative to Bitcoin may signal a downward trend. The daily chart for Ethereum against the US dollar also suggests a potential drop to $144 in high volatility conditions.

Source: TradingView

Analysts indicate that the ongoing decline in the BTC to ETH exchange rate also supports this argument and may suppress its potential upward trend in the short term.

Source: CoinMetrics

Currently, Ethereum's high volatility relative to Bitcoin has introduced pullback risks to its price, but the future trend remains to be seen.

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